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7.
2. Productivity Index
Total Value of Output
Productivity Index =
Total Value of Input
The productivity index (P.I) can be more or
less than 1.
P.I > 1 = business running efficiently
P.I < 1 = business running inefficiently

8.
3. Process Planning
Symbol
Type of
Activities
Description
Operation
Activities that modify, transform or give
values to the output
Transportation
When materials are transported from
one point to another.
Inspection
Measures standard of the in-process
material, finished product or services
Delay
When in-process material is restrained in
a location waiting for next activity
Storage
When in-process materials or finished
products are stored in the storage area.

10.
Step I
Identify and list all the raw materials required
to manufacture the product or provide the
service.
– Restaurant: the raw materials required depend
on the menu for the day
– Cleaning service: the materials required include
consumable items like detergents and scrubbing
pads.
– Retail business: fresh goods, sundry goods,
canned goods.
– Burger Stall: the raw materials used are
proportionate to each layer of ingredients inside
the burger.

13.
Step III
• Estimate the raw material requirement
by multiplying the bill of materials with
the total number of cookies to be
produced monthly.
• The number of units to be produced
must be based on the sales forecast in
the marketing plan.

14.
Example:
If the forecast demand per month is 50,000
units of cookies.
If the amount of stock at the end of the
month is 5% of the amount.
= 50,000 + 5%(50,000)
= 50,000 + 2,500
= 52,500 cookies/month

17.
Capacity Planning
• The capacity of any production
operation refers to the amount of
output that can be produced within a
specified time.
• It is a method to calculate machinery
and manpower requirements so that
production demand based on sales
forecast can be met.

18.
• Based on monthly sales forecast, the
daily production capacity can be
determine by dividing it by the number
of working days per month.
• This capacity should be divided by the
number of working hours per day to
give the capacity per hour.

19.
• If sales forecast is 520 units of ‘tudung’
per month.
• If working days per month is assumed
to be 26 days per month, the daily
production rate is:
910
days = 35 ' tudung' per day
26
35
hours = 5 ' tudung' per hour
7

20.
Purchasing of
‘tudung’ materials
Storage of ‘tudung’
materials
Cutting of raw materials to size.
i.e large, medium and small
Quality inspection
Transport the materials that
have been cut to tailor’s
table
Sewing by
tailors
Ironing
Packaging
Storage before
shipping out

21.
Activity: ‘Tudung’ cutting
If one cutter can cut 1 ‘tudung’ in 1/3
hour, the reciprocal of this is:
= the cutter’s capacity to cut per hour
= 3 ‘tudung’ per hour
Therefore, the number of cutter required
is:
= Production capacity per
hour/cutter’s capacity per hour
= 5/3 = 1.67 (needs 2 cutters)

24.
5. Layout
• Layout refers to the arrangement of
machinery, equipment, workers and other
facilities used in the operation.
• The arrangement should be made in such a
way that the production of goods and
services can be done efficiently.
• It should take into consideration the
integration of several factors including work
station, tool room, store, office, prayer room
and toilet.

25.
Types of layout
Layout based on product
– The design is done according to the
sequence of activity to produce the
product.

26.
Layout based on process
– The design is based on the production
process.
– It is suitable for a factory producing
several products that undergo a similar
process.

27.
Layout based on marketing
– The layout is designed to utilise the
available space to display goods.
– Example: retailed shop and bookshop.
•Arrangement of goods are
interactive
•Goods are easily accessible and
convenient for the customers
•It is easy for the entrepreneur to
protect goods from theft
•The entrepreneur can maximize the
return of investment form the space
used.

28.
6. Physical Location
• It is crucial to choose the right location
for the business because a strategic
location can contribute to the success
of the business.
• The choice of location will depend on
the following factors:
– Distance of operation centre/factory
is near from the source of raw
materials
– Near to the source of manpower

30.
7. Operations Costs
• It is essential to determine the total
operational cost in order to calculate
the cost per unit of the goods
produced.
• Operations costs include costs of
direct material, direct labour and
overheads

31.
• Direct materials costs
– Money spend on materials that are
directly used to produce the products
or services.
• Direct labour costs
– The money paid as wages, salaries and
benefits to the workers involved directly
in the production of the products and
services.
• Overhead costs
– Include electricity, water, rents,
insurance, wages of indirect labour,
maintenance and depreciation.